Energy Efficiency, Climate Change and our Nations's Future

ENERGY EFFICIENCY, CLIMATE CHANGE AND OUR NATION’S ENERGY FUTURE

Remarks by Eileen ClaussenEnergy Efficiency Forum, Washington D.C.

June 16, 2004

It is a pleasure to join you to talk about energy efficiency, climate change and our energy future. I understand that the organizers of the forum, in seeking someone to make the connection between energy efficiency and climate change, originally extended an invitation to Dennis Quaid. Mr. Quaid is the actor, of course, who plays a climatologist in the film The Day After Tomorrow, which in case you have not heard is a movie currently in theaters that turns climate change into a global Armageddon. I am sorry to report, however, that Mr. Quaid’s flight was delayed by tornadoes, tidal surges, flooding and hail. So you will have to settle for me.

That was a joke. And now I will move on to more serious things. I know you have heard from many experts today about many different topics, so I want to be brief and make seven quick points.

My first point is that any discussion of energy policy to deal with three issues. The first is energy supply (and therefore security) – Can we find enough energy to meet our needs from sources that are secure? The second issue is climate change – Can we provide the energy we need in ways that do not harm the climate? Last but not least is the issue of cost or price – Can we meet our energy needs in affordable ways that will allow us to continue to grow our economy?

Looking across these three issues, it is clear to me that what we need is a climate-friendly energy policy on the one hand and an economy-friendly climate policy on the other. Some elements of these policies will be the same, but the important point is that we need to think broadly about how best to achieve the related goals of protecting the climate and meeting America’s energy needs affordably in the decades ahead.

My second point is that, looking across these three issues I have mentioned – supply, climate and cost – energy efficiency is an obvious “win-win-win.” Supply and security become less of a problem to the extent that we can save energy through efficiency efforts. Every barrel of oil or ton of coal that we do not burn because we are more efficient means less carbon dioxide in the atmosphere. And, on the cost issue, of course, energy efficiency is relatively cheap and can, in many cases, actually save money.

At the Pew Center, we work with 38 leading businesses that are taking practical steps to reduce their contribution to climate change. Many of the members of our Business Environmental Leadership Council are embracing energy efficiency as a key strategy, and they are reaping remarkable rewards. For example:

· DuPont used 9 percent less total energy in 2002 than it did in 1990, despite an almost 30-percent increase in production. The resulting energy savings: nearly $2 billion.

· Another example is IBM. Between 1990 and 2002, IBM’s energy conservation measures resulted in savings of 12.8 billion kilowatt hours of electricity, avoiding nearly 8 million tons of CO2 emissions and saving the company $729 million in reduced energy costs.

I have often said that there is no silver bullet solution to the problem of climate change – in other words, it is a problem that will require multiple solutions. But when you hear these stories—and when you look at the need to address climate change alongside the need to keep America safe and economically strong—you start to see how energy efficiency is about as close as you can get to a silver bullet. It is not the only answer, but anyone who would suggest that it is not an essential part of the solution is not seeing clearly. We would be foolish not to make it a priority.

But, of course, energy efficiency alone will not solve our energy and climate problems. And that is my third point. U.S. energy intensity is already improving by 1.5 percent per year. If we could accelerate this rate to 2 percent per year, energy use in 2050 would be nearly 50 percent lower than it would otherwise be, but still up 60% from current levels—clearly not where we need to be if our energy sources are not carbon-friendly.

So what these figures do tell us is that energy efficiency is an essential component – but not the only component – of any long-range effort to protect the climate.

And this brings me to my fourth point. We need a wide-ranging portfolio of technologies and strategies. We need to create the conditions for a new industrial revolution that will reach across each of the major energy-producing and -consuming sectors of our economy. And every technology that could potentially play a part in this revolution comes with challenges – challenges that we can frame, once again, in terms of the three issues of supply, climate and cost.

With use of natural gas, for example, we can limit our emissions of greenhouse gases, but there are real challenges in terms of supply and cost. With coal, by contrast, it is the climate and not cost or supply that we need to worry about (unless we put real effort into carbon capture and sequestration and can make it work at an affordable price). Cost, of course, is an important challenge for nuclear power, as are considerations of waste and weapons proliferation. And cost is also a challenge with renewables--a challenge that clearly influences the supply and use of these technologies. When we look at oil, we see challenges in all three areas. The world may have ample supplies overall, but the security of those supplies is an obvious concern, as are the price and the climate. And finally, is there a silver bullet in the hydrogen economy? Here there are many challenges, from infrastructure changes to the very important question of where the hydrogen comes from. We cannot forget that if it comes from coal, and there is no carbon capture and sequestration, we are better off with conventional fuels.

In other words, there is no technology without a challenge, and no technology that can by itself be “the” energy solution to meet our needs. We need to consider the full range of solutions available to us, work on them all, and try to meet the challenges and opportunities each present.

This brings me to my fifth point. While it is clear that we need a portfolio of technologies, I believe it is also clear that we need a policy that will draw the technologies into the marketplace. In other words, the “if you build it, they will come” energy strategy is not a realistic one.

Just last year, the Pew Center brought together a group of businesses and experts to explore three very different future energy scenarios for the United States. And what they found was that even in the scenario where we modeled the most optimistic assumptions about the cost and performance of new energy technologies, carbon emissions were still rising in 2030. This result points to the need for a mandatory carbon policy -- raising the question of what that policy should be.

Which brings me to Point Number Six. In the same way that no single energy technology solution will solve all of our problems, no individual policy solution will be enough to do the job.

As I said at the start of my remarks, we need both a climate-friendly energy policy and an economy-friendly climate policy. There will be a lot of overlap, of course, but the problem of climate change demands targeted policies. More than anything else, that means adopting a cap-and-trade system for large sources of greenhouse gas emissions that begins to yield real reductions in those emissions—and that does so in a way that gives companies a high degree of flexibility and keeps overall costs under control. This is the approach at the heart of the legislation introduced last year by Senators Joseph Lieberman and John McCain. A companion measure was introduced in the House of Representatives this spring.

But at the same time that we are crafting targeted climate policies, we also need to craft an energy policy for this country that will keep us safe and our economy strong—while also providing climate benefits. Here, I think we need both carrots and sticks. Some carrots should be in the form of substantial (and I mean very substantial) funding and public-private partnerships for research, development and demonstration of new carbon-friendly technologies. Others should be in the form of incentives and rewards for bringing to the market new, carbon-friendly technologies. But we also need sticks. Examples of sticks include efficiency standards for everything from appliances to automobiles and trucks, as well as renewable energy mandates.

So there we have it: a portfolio of technologies and a portfolio of policies. And that brings me to my seventh and final point. It is going to take a great deal of political will to pull this off. One piece of legislation, one high-profile initiative or one high-profile technology is not going to be enough to create a new industrial revolution. In the years and decades to come, we are going to need a sustained commitment to this agenda from our national leaders.

Right now, we are beginning to see the stirrings of that political will. The McCain-Lieberman bill attracted the support of 44 U.S. senators, a respectable number and an indication of growing support for U.S. action on the climate issue. Even more encouraging is the action we are seeing at the state level on this issue:

· For example, New York and nine other mid-Atlantic and northeastern states are discussing a regional “cap-and-trade” initiative aimed at reducing carbon dioxide emissions from power plants.

· And, in California, the state’s Air Resources Board is working to set greenhouse gas emission standards for new passenger cars and light-duty trucks, starting in model year 2009.

That is what I call political will, and we need a lot more of it. If we want to go on a diet – and a “low-carb” diet is what we need – we are going to need all the will power we can muster. We need to build a low-carbon economy, and we need to have it in place by the middle of this century. And that means making a real commitment to a climate-friendly energy policy and an economy-friendly climate policy.

It is not every generation that has a chance to launch a new industrial revolution. History has presented us with an awesome responsibility to the generations to come. And we will forever be remembered for the manner in which we respond.